Justin Lahart of CNN/Money has been writing some of the most consistently interesting commentary on the bond market and the Federal Reserve.
Today he puts out not one but two good stories; Here’s a pointer and an excerpt to both:
Once bitten…
Burned by the Fed in 1994, the bond market is playing it cautious.
EXCERPTS:
NEW YORK (CNN/Money) – The bond market is convinced that it’s 1994 all over again. The Fed’s job on Tuesday is to try to convince investors that this is not the case.
1994 was a disastrous year for bonds, with many investors caught unawares of how aggressively the Fed would tighten the screws as it engineered a “soft landing” for the too-hot U.S. economy. After holding steady at 3 percent for over a year, the Fed, between February 1994 and January 1995, ran the fed funds target rate up to 6 percent.
The Treasury market got slaughtered. The yield on the 10-year note went from an October 1993 low of 5.19 percent up to a November 1994 peak of 8.05 percent. The rout left many investors badly damaged and some, like the hedge fund Askin Capital Management, were forced to shut their doors. The experience left a deep scar on the market. Participants vowed not to let it happen again.
So this time around they began unloading Treasurys . . .
-Justin Lahart, CNN/Money Senior Writer
August 12, 2003: 8:27 AM EDT
Clarity, please, Mr. Greenspan
Calls are growing for the Fed to say what, exactly, would make it raise rates.
A growing number of observers have come to believe that the best thing the Federal Reserve could do to ensure economic recovery is offer up a little more clarity on what, exactly, might prompt it to start raising rates again.
At this point it seems unlikely they’re going to get their wish.
-Justin Lahart, CNN/Money Senior Writer
August 12, 2003: 8:28 AM EDT
